By steadily eroding the value of the dollar, inflation will, over long periods of time, drastically reduce the purchasing power of the dollar, and thus seriously affect long-term financial planning. One example of this problem is pensions, which are discussed above. Another is life insurance planning. The essence of life insurance is to provide a sufficient amount of money to be invested to provide the survivor (say, widow) with enough investment income to live reasonably well. Suppose that a widow, age 32, invests the $200,000 of her husband’s life insurance benefits so as to earn $20,000 per years of interest income. While this may seem quite comfortable, inflation of 9 percent per year will reduce its purchasing power to $10,000 by the time she is 40, $5,000 when she is 48, and $2,500 at age 56 – one-eighth of its original value.
What can be done about this? By planning for far greater pensions and life insurance, this effect can be offset – but few people can afford to put aside that much out of today’s income for tomorrow. Consequently, most people cannot protect themselves against this problem, and remain very vulnerable to inflation over the long term. By eroding the purchasing power of money, inflation undermines the role of money as a store of value, making it difficult to plan for the future and to provide for protection against future financial risks. Rather, inflation encourages short-term thinking: “Spend, don’t save, and let the future take care of itself.”
CBC News – Consumer Life – Concerns raised about furnace company’s …
http://www.forexforexforexforex.ryeglasses.com/
Related Websites - Tips for Combining Finances The following is a post from staff writer Crystal from Budgeting in the Fun Stuff, where she writes about finding the balance between paying your bills, saving for your future, and budgeting for the fun stuff along the way. Daniel’s...
- Is Social Security Income an Asset? NO! I just read a very interesting article on Wall Street Journal Personal Finance Section, titled "Save Your Nest Egg, Hold on to Stocks" written by Mr. Zweig. The article surrounds the idea that since your Social Security income stream can...
- Pros And Cons Of Variable Life Insurance When the time comes to purchase life insurance, there are several factors to consider before committing to one policy (how much, which type of life insurance, etc). Life insurance is often a necessary expense in order to protect our loved...
- Links: Back in Boston Edition This week I'm taking a vacation and seeing family and friends in Boston. I had gotten to the point where I really liked the San Francisco area. I didn't realize how much I missed Boston. I got very emotional driving...
Tags: Amount Of Money, Auto Finance, Essence Of Life, Financial Planning, Furnace Company, Inflation, Insurance, Insurance Planning, Interest Income, Investment Income, Life Concerns, Life Insurance Benefits, Long Periods Of Time, Pensions, Power Of The Dollar, Purchasing Power Of Money, Survivor, Widow Age, Winnipeg